Industry players believe that the surge in premiums for term plan is only due to the changes in re-insurance premiums and not because of the ongoing pandemic.
Several life insurance companies have increased the premiums for term insurance plans in the past few months. Industry participants expect further surge in term plan premiums going forward as many insurers are likely to increase the premiums by around 20%.
According to the life insurance industry players, the increase in term plan premiums were changed after increase in re-insurance premiums. “Many insurance companies have increased the rates in the range of 20-35% since April this year. But many insurers did not increase the rates, and they can increase the rates by 20% in the next few months,” said a senior official from the life insurance industry.
The data from Policybazaar website shows that for a 30-year-old with sum assured of Rs 1 crore and life cover upto 80 years, the insurers have increased the rates since start of this financial year. Data shows that ICICI Prudential Life Insurance had premium of Rs 14,697 in March 2020 which has been increased to Rs 20,208 in July. While premium for HDFC Life term plan in July stood at Rs 17,563 compared to Rs 14,626 in March this year.
Reinsurance companies had announced increase in premium rates because of higher than expected mortality deaths across insurance companies in India. In the past few month’s investors have been buying term insurance after the rise in the novel coronavirus in India. Term plans are the simplest form of insurance and provides large sum assured with lower premiums compared to endowment plans.
Industry players believe that the surge in premiums for term plan is only due to the changes in re-insurance premiums and not because of the ongoing pandemic. Prashant Tripathy, managing director and CEO at Max Life Insurance says in term plans prices are determined by the mortality experience and premiums were perhaps cheapest in the world.
“There was a need to change the prices and they have not gone up drastically. Even now term plans are extremely affordable. Again, we have to see how Covid-19 impacts the overall claims experience. Having said that I am not expecting the pandemic to make significant impact on claims experience. So I am not anticipating over the short period of time large increase in the term plans at all,” said Tripathy.